Elliott Management Corporation, which has a minority equity stake in Telecom Italia (TIM), has revealed corporate governance failings and conflicts of interest at the telecom giant by majority owner French media company Vivendi.
Elliott is also looking for the replacement of 6 members at the TIM board in order to enhance the value of the company.
There are several recent examples of Vivendi exercising its control without regard for minority shareholders’ interests.
TIM board earlier treated the joint venture between TIM and Canal Plus as a related party transaction with minor relevance, avoiding the requirement for a binding opinion from the independent directors. Subsequently, independent directors and statutory auditors flagged this issue several times. After CONSOB considered the issue, TIM reclassified the joint venture as a related party transaction with major relevance.
In January 2017, TIM awarded an advertising mandate — rumoured to be worth around €100 million — to Havas, which is owned by Vivendi.
TIM appointed Michel Sibony as head of the Procurement Unit and Real Estate Department at TIM’s March 6 2018 board meeting, despite holding several functions within the Bollore Group, Havas, and Vivendi. Vivendi recently appointed him as chief value officer.
Vivendi proposed Felicite Herzog as an independent director on the TIM board and elected at both the December 2015 and May 2017 AGMs. She is also a member of the company’s Control and Risk Committee. Notwithstanding her independence, Felicite Herzog is chair and founder of the consulting company Apremont Conseil whose business relationships with both the Bollore Group and Vivendi are currently being investigated by CONSOB.
The European Commission detected horizontal, vertical and conglomerate effects caused by Vivendi’s simultaneous de-facto control of TIM and significant stake in Mediaset. Vivendi has forced TIM to sell its 70 percent stake in Persidera to solve this. The sale will be executed by a trustee without stipulating a minimum price.
Vivendi has broken the Gasparri law, building a controlling stake in TIM and a large stake in Mediaset, which has further impaired Vivendi’s relationship with the Italian regulator and other Italian bodies.
Non-independent directors were exempted from non-competition requirements at the last AGM, despite the dissent of most investors other than Vivendi.
Vivendi lost two TIM CEOs in two years, spending €25 million on severance for Flavio Cattaneo alone, after only 16 months in service, despite the Board of Auditors expressing a negative opinion on his initial compensation package.
Vivendi’s strained relationship with Mediaset limits crucial content acquisition options at fair market value for the company.